Informist, Thursday, Aug 29, 2024

--Ashima Goyal: Recent NPAs not as worrying as in 2010

--Ashima Goyal: India growth never credit-led, but may be different now

--Axis Bk Mishra: Retail lending much safer now than 15 years ago

--Neelkanth Mishra: UPI hastened formalisation, brought transparency

--Neelkanth Mishra: Progress in fintech has brought fincl svcs costs dn

MUMBAI – The recent slight increase in bad loans in some segments in the banking system is not "so worrying" as it was in 2010, said Ashima Goyal, professor at the Indira Gandhi Institute of Development Research.

Goyal is also an external member of the Reserve Bank of India's rate-setting panel. Goyal and other two external members' four-year term will end on Oct 4.

"But it is very different. Today, the exposures that are rising are very small exposures. They are not giant exposures to big companies," Goyal said at the Global Fintech Fest during a panel discussion.

In Apr-Jun, some banks witnessed a rise in slippages due to stress in Kisan Credit Card portfolio, personal credit, and micro finance segment.

According to the RBI's Financial Stability Report for June, the gross non-performing asset ratio of scheduled commercial banks improved further to a 12-year low of 2.8% as of Mar 31.

In June, RBI Governor Shaktikanta Das had said that banks and non-banking financial companies were well positioned on capital, asset quality and profitability parameters.

"I think overall, the problem of bad loans will now be contained, but we have to remain there. That is why we keep on giving all those cautionary advice," Das had said.

Goyal said that a lot of banks have now adopted risk-based lending, which means they are already covering for risks of potential NPAs. She said when too much exuberance was seen, the central bank acted proactively by tightening risk weights.

Last year, the central bank had flagged certain concern over excessive growth in unsecured retail loans and over-reliance of non-banking finance companies on bank funding. The RBI later increased risk weights on unsecured consumer credit and bank credit to NBFCs to pre-empt the build-up of any potential risk in these segments.

"In the past, India's growth has never been credit-led, but this time, it could be somewhat different because of all the innovations," she said.

At the same panel discussion, Neelkanth Mishra, chief economist at Axis Bank, said retail lending is much safer now than what it was 15 years ago.

He said Unified Payment Interface has hastened formalisation and brought a lot of transparency in the banking services, and progress in fintech has lowered the cost of financial services. End

Reported by Darshan Nakhwa and Kshipra Petkar

Wriiten by Richard Fargose

Edited by Akul Nishant Akhoury

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